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Leveraging Tangible Property Regulations

Dec 4, 2023

Learn more about tangible property regulations (TPRs) in the context of cost segregation. In this episode, EisnerAmper and Capstan Tax Strategies discuss whether TPRs maintain their utility in today's tax landscape, explore their role in renovations, and unpack the expensing options they bring to the table. We also breakdown the B/A/R, Unit of Property (UoP) and materiality tests, and outlines how cost segregation studies provide essential data for applying TPRs.  

In this episode of Breaking Ground, the EisnerAmper podcast dedicated to the real estate market, our hosts discuss the Tangible Property Regulations (TPRs). Are the Regulations still relevant in the post-Tax Cuts and Jobs Act (TCJA) and post-Coronavirus Aid, Relief, and Economic Security (CARES) Act landscape?

The Purpose of TPRs

Introduced in 2014, the primary goal of the TPRs was to establish a consistent approach for determining whether property improvements should be expensed or capitalized. The TPRs aimed to bring clarity to decision-making processes, replacing what was once perceived as the "wild, wild west" of property improvement taxation.

Despite the initial confusion surrounding the TPRs in 2014, they remain crucial for making informed decisions on expensing or capitalizing property improvements. Our hosts emphasize the continued utility of TPRs in the context of today's tax landscape.

Navigating Renovations Using the BAR and Materiality Tests

The BAR test is employed in renovation scenarios to determine whether property improvements qualify as betterments, adaptations, or restorations. It’s important to consider the implications of bonus depreciation and the avoidance of recapture when conducting the BAR test.

The subsequent materiality test is applied to determine the impact of the asset in relation to the appropriate building system. 

Partial Asset Disposition (PAD) Election

The discussion wraps up with an overview of the Partial Asset Disposition (PAD) election, relating to the treatment of retired assets in a renovation scenario. In the year the asset was retired, its remaining depreciable basis may be written off – it’s important to be mindful of this time-sensitive opportunity. 

Listen to the full episode above for more details about Tangible Property Regulations and subscribe for future episodes of Breaking Ground.

Breaking Ground

Breaking Ground is podcast series where you’ll hear the latest updates and trends in the real estate industry – directly from real estate leaders.  

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Avi Jacob

Avi Jacob is a Compliance Tax Manager in the Real Estate Services Group.

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